Organizational Resources, External Environment, Innovation and Firm Performance: A Critical Review of Literature

Abstract

Organisational climate (OC) plays an important role in the innovation of an organisation. In addition, innovation has become critical for nations, organisations and individuals in an increasingly complex and challenging world. Yet, very few studies are designed to investigate the causal path of the effect of innovation on organisational performance systematically by examining the influence of organisational climate. The purpose of the study has been to consolidate, synthesize and critique the empirical studies that have examined the relationship between organisational climate, innovation and organisational performance. A systematic literature review approach has been followed to find the appropriate studies on these constructs (organisational climate, innovation and organisational performance) and the building blocks of science (concepts, statement and conceptual framework) have been used as a structure to analyse and report on the findings. After consulting 96 major databases, covering a wide range of fields, only seven articles that investigated the causal path between organisational climate, innovation and organisational performance were identified. The differences and similarities on how concepts were used are presented. These differences become particularly apparent when the tools used to measure these constructs are examined. Studying the articles has also resulted in the development of appropriate and comprehensive typologies concerning the variables. The findings also show that models are typically linear and these are affirmed when subjective, rather than objective, measures are used. This research study alerts researchers and practitioners alike about the importance of clear and shared definitions of constructs. Without that meaningful communication, observation on the topic is impossible. The findings also show that the methods of measurement influence results, which should be considered when interpreting the results.